Keep a close eye on the supply chain

Published:08:22Saturday 27 July 2013

WHAT would you do if your main supplier went out of business, or how would you be affected if illegal behaviour were discovered in your supply chain? Do contingency plans exist to cover such real possibilities?

The horsemeat scandal highlighted the damage that can be done, not just to revenue streams, but also to corporate reputations.

A post-scandal survey by Ernst & Young found that just 48 per cent of British companies undertake any due diligence on supply chains.

The survey also found that 14 per cent of respondents did not know what third party due diligence meant.

Victoria Spencer of Ernst & Young said: “The issues around contamination of products have highlighted the importance of ensuring the integrity of a supply chain. Companies are, in most cases, responsible for the actions of third parties acting in their name; however, our research reveals that firms, across a range of sectors, are not carrying out basic checks.”

James Aitken, convener of Scottish Borders Chamber of Commerce, added: “It’s pretty alarming that less than half of companies carry out sufficient due diligence. Businesses really need to ensure that their links with supply partners are robust and viable.

“In many sectors, suppliers need to be trusted and fully integrated into the production process. Their role is vital and often long-term, so it only makes sense to ensure they’re sound and stable.”

Mr Aitken added that suppliers to Borders firms may be some distance away, making it even more important that adequate systems are in place to highlight problems early, and to deal with them if the worst happens.

The lessons are clear – disruption of the supply chain can seriously harm not just a company’s viability, but also the trust and loyalty of its customers.